Brussels, 13/05/2011 (Agence Europe) - Despite pressure to reach agreement from the Hungarian Presidency, Italy and especially Luxembourg kept up their resistance at the meeting of the EU Permanent Representatives' Committee (sherpas) on Wednesday 11 May to the compromise measures drawn up by the Hungarian Presidency for the updating of the EU savings tax directive (see EUROPE 10369). The Presidency has not removed the issue from the agenda of the ECOFIN meeting on Tuesday 17 May, hoping that agreement may yet be reached.
In the draft conclusions document, the Hungarian Presidency suggests that the ministers give the European Commission a negotiating mandate for agreements with Switzerland, Liechtenstein, Andorra, San Marino and Monaco that they will introduce equivalent measures to the updated EU savings tax directive, which will cover additional savings products like investment funds and life insurance, along with brokers in the form of trusts and foundations. It also suggests automatic exchange of information among tax authorities.
Arguing that the directive in its current format has not yet been properly implemented by a number of member states, Italy is opposing the opening of new talks, but might change its mind when it has examined the Commission's progress report on implementation of the savings directive, due to be published next month, assuming the report makes a positive assessment (which sources say is likely).
The real veto is expected from Luxembourg, the only member state to express general policy objections to the suggested changes to the directive. Luxembourg categorically rejects the idea of the directive covering life insurance policies, fearing that this could lead to an exodus of such funds from Luxembourg and elsewhere to non-EU countries. Luxembourg says it will agree to the proposed changes only if Switzerland, Liechtenstein, Andorra, San Marino, Monaco and the ten UK and Dutch offshore territories agree to apply equivalent measures. Luxembourg is refusing to go along with the idea of having off the question of a transition period when it would be able to continue with its current deduction of savings tax at source (which enables the identity of savers to remain under wraps). This is a serious stumbling block, but Luxembourg does not seem to be backed by other countries at the moment over this issue.
The ECOFIN Council will discuss the question of taxing the financial sector. The Hungarian Presidency will present a report on the taxation of financial institutions and the ministers will also examine a report from the Economic and Financial Committee on bank levies. General agreement seems to be emerging on both issues. (F.G./transl.fl)